Bucking Manufacturing Employment Trends

Over the past two decades, job insecurity has become the norm in the manufacturing industry worldwide. Data from the U.S. Department of Labor's Bureau of Labor Statistics indicate that U.S. manufacturing employment dropped, on average, by 1.08% annually between 1986 and 2003. And though the U.S. job market posted a 2,000-person net gain in six major engineering-and-computer job classifications ...

Vance VanDoren

11/01/2005

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AT A GLANCE

Cyclical employment problems

An alternative to layoffs

How the policy works

Risks and benefits

Over the past two decades, job insecurity has become the norm in the manufacturing industry worldwide. Data from the U.S. Department of Labor's Bureau of Labor Statistics indicate that U.S. manufacturing employment dropped, on average, by 1.08% annually between 1986 and 2003. And though the U.S. job market posted a 2,000-person net gain in six major engineering-and-computer job classifications in first-quarter 2005 vs. the 2004 average (especially among computer scientists), IEEE-USA reports declines for computer hardware engineers, computer software engineers, computer programmers, electrical and electronics engineers, and computer and information systems managers.

Even the hottest area for manufacturing growth on the globe—China—is not immune to the reality of job concerns. According to a 2005 report from the Bureau of Labor Statistics, 'Manufacturing Employment in China,' China's manufacturing employment levels dropped from 98 million in 1995 to 83 million in 2002.

The manufacturing employment problem is especially acute among automation and control system integrators where jobs depend on projects, and projects come and go. Automation engineers Craig Nelson, Neal Vaoifi, and Scott Young—founders of system integrator Mission Controls—have experienced the fluctuating job market firsthand.

'All three of us had spent our careers getting replaced as employers built up project load, and then it went down, and we'd get laid off. It was kind of a never-ending battle as an engineer trying to find stable employment,' says Nelson. Each of them had been laid off at least twice before founding their company in 1997.

And since they had all seen how the loss of a job could devastate an employee and his family, they were especially sensitive to the job security issues faced by their newly hired staff.

A different way

Nelson, Vaoifi, and Young took a different approach to the problem of cyclical employment. They offered their employees jobs for life and still do. They have even chosen to forego their own pay when necessary rather than layoff any of their staff. They also keep their employees up to date on all the details of how well the company is, or is not, performing.

Making do without a salary was altogether too common in the early years, including an eight-month stretch during the company's first year. 'We were very frugal during those months,' says Young. 'Most of the first work we did was service work, but for some of the projects we had to fund the materials before we got paid by the client.' That meant dipping into their savings and running up balances on their credit cards.

Vertical bars indicate periods of recession as defined by National Bureau of Economic Research.

Young adds 'some of our customers knew our situation, so they were more willing to pay their bills on time. Still, we had to be very diligent in controlling our cash flow.' Today, with 40 employees and about a dozen projects underway in the food, beverage, and cosmetics industries, no one's salary is at risk.

The founders have also gotten better at planning ahead before hard times hit. 'It's kind of like the speed limit,' says Nelson. 'You know there aren't cops everywhere, but you know there's the threat of that, and that's what keeps people driving within the speed limit. It's the same thing here—knowing that we could lose our pay, there's always work you can find.' Advising other system integrators in how to do this effectively, Nelson says, 'It may mean taking little jobs outside of your skill area, but you can fill in the voids if you really need to.'

Mission Controls also keeps close tabs on its clients' future needs. 'We know what their budgets for controls and equipment are going to be in the upcoming year,' says Young, who notes that the company will even quote some jobs for the next fiscal year to facilitate its planning. 'And the more jobs we quote, the more jobs we get.'

Employment screening

Not surprisingly, hiring employees for life complicates the hiring process. A three-part screening process begins when a member of the administrative staff calls an applicant to schedule an interview. Candidates are rated from one to five according to how well they treat the staffer on the phone and whether they ask intelligent questions.

'We like to see if, when candidates have someone on the phone with inside knowledge, they try to extract that information,' says Nelson. 'It's a good way for us to be able to tell exactly how interested they really are in us.'

After completing a technical interview with the appropriate supervisor, a candidate is subjected to the 'Screening New Applicant Group' or SNAG. The technical interview is important, but at least 70% of the decision is unrelated to skills and is more about character. With that objective in mind, a SNAG of five peers interviews the candidate in a group session with no managers present. Each team member then renders his own recommendation to hire the candidate or not. A successful candidate requires unanimous approval.

Open-book policy

The company's open-book management policy also helps engender a sense of cooperation and mutual benefit. 'We get a lot of help from employees during the tough times, but that means they have to know what we know,' says staff writer Douglas Terrel. 'Employees here know everything except salaries, including our profit margins and how much job bids are.'

So when employees know that profits are down, they come up with their own cost-saving measures. 'People voluntarily hold off on purchasing that new laptop or spending on travel and entertainment. And we see our monthly American Express bills dropping $20,000 without even asking for it.'

And when projects start running behind schedule, employees start looking at what went wrong and how to do better next time. Employees are also willing to put in extra time and effort when necessary to finish a project. 'Many will do things outside their immediate job description,' Nelson says. 'And all our staff have proven that they're willing to do stuff that's a job level or more below what they normally do.'

Exceptions

Of course, the no-layoff policy does not make the employees of Mission Controls entirely immune from termination. Serious malfeasance or incompetence can get an employee fired, but Nelson says he's only had to let a couple of employees go in all the years that the policy has been in place.

So is it worth the risk to promise an employee that he can keep his job for as long as he wants it? 'It's enlightened self-interest,' says Nelson. It gives Mission Controls a stable corps of employees who are well trained and knowledgeable about the company's business. The time and money spent on training a single employee who remains on the job for a decade is negligible compared to the investment that would otherwise be required to bring a new employee up to speed every couple of years.

And the company's clients benefit as well. Several of Mission Controls' employees have become experts in the details of their clients' industries.

Still, there are times when such a potentially risky proposition gives the partners pause. 'Maybe for 10 or 15 minutes at a time, as any business owner would when you're looking at bottom lines or you're under pressure from a bank or when you've got low points in cash flow,' says Nelson. 'But it's still something we firmly believe in.'

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